All Forum Posts by: Tobias Falzone

Flipping is faster and can generate higher returns, but it is an active process and a job. Rentals are more predictable and carry less risk. I like hybrid strategies where you look for value add opportunities in cash flowing multifamily properties. It may take two years to execute, but you can cash flow during ownership and enjoy an increase in value from improving the performance of the property on sale or refinancing. Steve Berges' book on buying and selling apartment buildings talks about this approach and it is what I would like to try to do for my future investments in multifamily. I think Huntsville is a great multifamily market for cash flow.

I would encourage you to avoid the true C class areas. The cash flow may be a bit better, but they also do not have the appreciation potential and have greater downside risk in a recession. I Would prefer to be in the path of progress, that would be the only way I could justify a C property. I Am attracted to low crime areas, better schools, and newer construction if you are looking for a low involvement investment, especially for a first property.

Sacramento regional median incomes are lower than San Diego, but population is more rapidly growing thanks to proximity to Bay Area and relatively low cost of living. There is more new construction in Sacramento because of available build-able land, but it isn't fast enough to keep up with population growth. I do feel that real estate values are being influenced by the Bay Area economy, especially for investment properties. People are looking to park money and others are fleeing high housing prices of the Bay Area. However, San Diego has stronger employers and has many more company headquarters than Sac. There are definitely opportunities both places.

The city is actively working to get rid of these illegal units and actually paying landlords to decommission legal units around the city to decrease density and crime. You would probably have more luck integrating the space into one of the existing units for additional rent. Personally, I would push to find a 1% rule property in Ogden, but the areas around the university are better and probably have less ideal rent ratios because of the stability.

I don't have any detailed insights on splitting a house to a duplex,  but if the zoning allows for a duplex, you won't have to worry about a zoning exception.  I would suggest contacting the planning department to see what additional fees will be incurred for creating a new unit.  

Hi Oleg, Deals are hard to find in Sacramento, though I successfully found an underpriced MLS property last year that became our primary residence and later closed on a hybrid flip project in West Sacramento I obtained from a wholesaler. I was able to finance the MLS property and paid cash for the other. We plan to refinance once the renovation is complete and rent it out for a few years at roughly neutral cash flow. This is a bet on appreciation, but even if appreciation is minimal, we can 1031 exchange into a better cash flowing property down the line. My goal is to replicate this with 4-5 more houses in the next 12 months. What are your targets, strategies and goals?

Many times commercial zoning already allows for multifamily or mixed use development. You would need to talk with your zoning authority about what the property can be used for and about receiving a variance if it does not. It sounds like the best chance for this project would be to secure an option on the property while you work to get the rezoning and other planning for the project completed. This will lower your initial outlay and limit your risk especially if your plan is to pass it off to a third party in the end.

Be careful how you set this up and be aware that you will still find yourself paying CA corporate taxes even if you register the LLC out of state. The BOE doesn't care if some members are not residents or that all business is conducted out of state. If they find out that a managing member lives in CA, they will pursue.

I would first project the income and expenses out for it as a vacation rental. You have to do some sleuthing, but it can be done. I would first assume that you would not use it at all to calculate an ROI of the property as an investment. Once you do that, you can calculate your monetary cost & benefit from using the property. Your cost is the is your lost income and the only benefit would be comparing that loss of income to other hotel costs in the area. Using that framework you can get a clear financial picture for the investment to compare against others.

I cringe when I hear people talk about how median income levels can't support home values. That should not surprise anyone. in LA, homeownership percentages are somewhere around 47% now. Using that number, median person doesn't own a house! It would be better to use a number closer to 75th percentile of income to describe the median homeowner, not the median person. That number in LA is close to 100k, and guess what, the median home values aren't completely out of whack with the median income of homeowners.